Hon. Rodolfo C. Severino, Jr., Secretary-General, ASEAN

Mr. Ricardo J. Romulo, Chairman of the Makati Business Club

Distinguished Guests

And Ladies and Gentlemen:

An international symposium took place in Japan last week. The subject was “Future of Asia” and was attended by world-class political and economic leaders, including President Gloria Macapagal-Arroyo of the Philippines and Prime Minister Mohammad Mahatir of Malaysia.

A variety of opinions was delivered by those who spoke at the symposium and an underlying view of the majority of the speakers was to signify China’s accession to WTO as an opportunity rather than a threat.

These opinions can be summed up as follows: that is, we should look toward building mutually complementary relations with China. This is based on the fact that China, in the wake of its accession to WTO, may put up a strong competition against ASEAN markets in the short-term. But, in the long run, enhanced investments in China’s manufacturing and service sectors can result in spillover effects on the ASEAN in the form of more Chinese investments and tourism in the region.

On the issue of regional cooperation and unity, speakers emphasized the need for ASEAN and China to build a free trade bloc. They also spoke of the need to enhance regional cooperation among East Asian nations in the context of the “ASEAN plus 3” framework, including Japan and South Korea as well.

From what I see, regional economic blocs have been forged with globalization. You can name NAFTA and EU as good examples.

ASEAN, however, still is highly dependent on foreign trade while regional trade contributes to no more than 20% of total trade activities. In addition, structural dependence on foreign investment for industrialization makes ASEAN least self-reliant and therefore, ASEAN is way below the level of a substantially functioning integral regional bloc.

On the other hand, if we expand the region from ASEAN to that also cover East Asia, the intra-regional trade remarkably increases with exports making up 40% and imports comprising 50% of the entire region’s total trade activities respectively.

East Asian countries make up 23% of the world’s GDP, and this is very close to 32% and 28% of world’s GDP made up by NAFTA and EU respectively. In terms of trade volume, East Asia makes up 25% of the global trade volume, which is below 37% taken up by NAFTA, but at the same level of the EU which undertakes 24% of the total world trade volume.

It would not be exaggerating to say that, in the sense of reality, the world economy and trade are being operated by these three trade blocs. This would lead us to understanding the vital importance that the regional unity of East Asia holds in sustaining development of ASEAN countries.

ASEAN countries have so far achieved development through export of labor-intensive mass production goods. However, the entry of rival countries into the market, brought about by a globalized economy, has harshly intensified competition in the world markets.

What ASEAN has to do is very clear. It has to achieve sustainability of development by way of advancing its industrial structures. The pattern of its development needs to be shifted from that which is so far based on “quantity” of elements being input into production toward what is primarily based on productivity that is supported by technological innovation and high quality of human resources.

The level of development varies among the countries of ASIAN, and each country has its own characteristic edge. In order to strengthen regional cooperation, we should look forward to upgrading the regional economy through the re-allocation of production bases among the countries of the region.

As the one working in the Philippines, I would also like to mention a few points regarding Philippine competitiveness:

First: Stability which is consistency.

In the 1980s, when the Japanese economy transferred its production bases to the rest of Asia, the Philippines failed to sustain political stability under the Marcos regime and long-term Japanese investments diverted to Thailand, Malaysia and Singapore. Industrial intensification advanced in these countries and the Philippines lagged far behind. The political situation and implementation of policies are on the pathway towards stability under the present administration of President Macapagal-Arroyo. We expect that the efforts toward stability are continued.

Second: Security.

Security, or the law and order situation of a country, is of primary importance in deciding investment. We expect that the Philippines will re-establish its perception among those overseas at the earliest possible as a “secure” place of investment. The Philippines is rich in its tourism resources. If and when the country re-asserts the law and the order and becomes a safe place, it can expect a huge influx of foreign tourists.

In the same context of law and order, I would like to mention that foreign investments are being expanded to provinces in Thailand, but such cases are few in the Philippines.

Third: Speed.

Improving productivity means faster production and timely delivery of goods to the users. In the Philippines, time-cost of production is heavy because of various reasons. The government-and-private-sector cooperation is definitely indispensable to improve production-related procedures such as port work, customs clearance and inland transportation and to speed up acquisition of government permits and licenses, VAT refund, administration of responsible offices and solution of labor disputes, and so on.

I appreciate this opportunity of expressing my views which I have laid out.

Thank you very much.